DUBLIN, Nov 14 (Reuters) - Ireland said it will not add new
austerity measures despite cutting its growth forecasts for the
next three years on Wednesday as Fitch rewarded it for continued
fiscal and funding progress by raising its outlook.

Bailed out Ireland has made spending cuts and tax hikes
worth 25 billion euros ($31 billion) since 2008 - equivalent to
15 percent of annual output - and believes the 8.6 billion
program already planned for 2013 to 2015 will be enough to get
it back on track.

That fiscal discipline helped Ireland become the first
bailed-out euro country to resume borrowing on long term debt
markets while at the same time eeking out some growth, prompting
Fitch to conclude that risks to its adjustment had narrowed.

"The revision of the outlook reflects Ireland's continued
progress with its fiscal consolidation, external adjustment and
economic recovery, as well as the sovereign's improved financing
options," Fitch said in a statement.

The rating agency left Ireland's rating at BBB+, three
notches above junk status, while upgrading its outlook to stable
from negative. Moody's is the only one of the three main rating
agencies to have downgraded the country to non-investment grade.

That news came after Irish voters, who have demonstrated
little during the crisis and did not join European-wide protests
on Wednesday, learned they will not face a nasty surprise when
measures totalling 3.5 billion euros are outlined in next
month's budget for 2013.

"On balance the government believes that the previously
identified fiscal adjustment path remains appropriate given the
need to support the emerging economic recovery," the country's
finance department said in its biannual economic update.

"Notwithstanding this welcome progress, it is clear that a
challenging road lies ahead."

Those challenges include pushing through further adjustments
of 3.1 billion euros in 2014 and 2 billion in 2015 to cut a
budget deficit set to be among the highest in Europe at 8.3
percent of GDP this year to an EU target of 3 percent by 2015.

Yet despite the unprecedented austerity, Ireland has avoided
joining much of the euro zone in recession thanks to a robust
export sector and expects to post its second year of economic
growth in a row this year.

It inched up its forecast for gross domestic product (GDP)
growth in 2012 to 0.9 percent from 0.7 percent previously, a
move flagged by the finance minister last week.

EURO ZONE RISKS

However, slowing demand from abroad, together with high
unemployment and relentless austerity at home, is getting in the
way of the kind of activity that would make big inroads into a
government debt set to peak at 121 percent of GDP next year.

The economy will therefore grow by 1.5 percent next year and
not the 2.2 percent forecasted in April, the finance department
said in a downgrade that was also anticipated.

That is still more optimistic than the 1.1 percent predicted
by the European Commission and International Monetary Fund, two
of the lenders monitoring Ireland's bailout, but in line with
economists polled by Reuters last week.

The ministry said the primary external risk stemmed from the
euro zone crisis while high household indebtedness could have a
worse than anticipated impact on a domestic economy where
unemployment is forecast to stay above 13 percent in 2015.

The economy is seen growing by 2.5 percent in 2014 and 2.9
in 2015, lowered than the prior prediction for 3 percent in each
year and the report said this assumed a pick-up in Ireland's
main export markets during the second half of next year.

After Ireland sliced around 10 billion euros off its
post-bailout funding requirements through this year's market
return, the ministry added that it expected the debt management
agency to continue to extend its market presence.

However, Moody's warned on Wednesday that Ireland will need
more bailout funds when its programme ends, adding that while
action to date were impressive, risks remained.